If It’s Price-Sensitive, Disclose It–or Else

Hong Kong’s long march towards clamping down on insider trading is taking another small step forward.

In a long drawn-out process, the government will finally gazette the Securities and Futures (Amendment) Bill , which would force companies to disclose price-sensitive information and make nondisclosure a punishable offence. The bill will be gazetted by the Legislative Council on 29 June.

“Implementation of a statutory obligation to disclose price sensitive information is strongly supported by the Listing Committee. Gazettal of the Bill is a further step towards implementation,” said Mark Dickens, the Hong Kong Exchanges and Clearing Ltd.’s Head of Listing in a statement.

According to an earlier statement from the government, the SFC would be the enforcement authority and the Market Misconduct Tribunal, a civil body established in 2003, would hear the case.

Writing on his website, shareholder activist David Webb, who has been pushing for statutory backing for all the stock exchange’s Listing Rules, says narrowing the legislation to only disclosing price sensitive information is a “watered down” alternative. Furthermore, nondisclosure is only punishable as a civil rather than criminal offence. In Australia, company directors can be jailed for nondisclosure of price-sensitive information, said Mr. Webb.

“The tycoons have got what they wanted,” he told the WSJ in a previous interview.

In addition, the MMT has been severely underused since it was set-up. Questions have also been raised over whether proposed fines can be enforced, after a landmark case in 2008 in the Supreme Court ruled that fines imposed by a civil tribunal would violate Hong Kong’s bill of rights. The government subsequently said that it has taken that case into consideration and that it has legal backing for the fines.

If that all sounds as if Hong Kong is still some way behind other major financial centers of the world, it’s worth bearing in mind that insider trading wasn’t even made a criminal offence here until 2003.

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